Policies and Procedures

7110 Reserve and Contingency Fund Policy

Policy

Adequate fund balance and reserve levels are necessary components of the college’s overall financial management strategy and key factors in assessing the college’s financial strength and fiduciary integrity. Maintenance of a fund balance for each accounting fund assures adequate resources for cash flow and mitigation of short-term revenue shortages, and enables multi-year planning for self-support program improvements.

General Policy

College reserves shall be adopted by resolution by the board of trustees as part of the college’s annual budget plan. All expenditures drawn from reserve accounts shall require prior approval from the president, unless previously authorized for expenditure within the college’s annual budget, approved by the board of trustees.

Ancillary and Auxiliary Fund Reserves

The college will maintain a reserve for each of its ancillary or auxiliary funds to provide for adequate cash flow, multi-year planning, and operating contingencies. The reserves will be 15 percent of each fund’s operating expenditures unless a different level is necessary to sustain its operations.

Capital Reserves

The college will maintain, as necessary, a local capital account to manage facilities needs that are not funded or are underfunded by the state.

Contingency Fund

The college will maintain an annual contingency fund equal to three (3) percent of the operating budget expenditures to cover revenue shortfalls, unplanned but necessary expenditures, or operating changes that occur outside of the planned annual budget.

Operating Reserves

The college will maintain an operating reserve to provide for such items as adequate cash flow, emergencies, budget contingencies, multi-year planning or capital commitments. The general fund operating reserves will be based on fifteen (15) percent of the college’s operating budgeted expenditures.